Business area Civil Engineering
Greater need for infrastructure is driving a strong market
|Net sales, MSEK||11,825||10,740||10,448|
|Operating profit, MSEK||374||355||381|
|Operating margin, %||3.2||3.3||3.6|
|Orders received, MSEK||14,191||12,089||10,433|
|Order backlog on 31 December, MSEK||10,832||8,679||7,292|
|Number of employees on 31 December||3,344||3,080||3,019|
Business area Civil Engineering is a leading supplier in Sweden with operations in Norway and Finland as well. The business area works with landscaping and pipelines, builds and maintains roads, railroads, bridges and other infrastructure as well as foundation work. Operations are organized in geographic regions and the specialized product areas: Local market, Infrastructure and Operation and maintenance.
Business area Civil Engineering is active on the local civil engineering market working with landscaping and pipelines, foundation work and builds different kinds of facilities. In the area of infrastructure and heavy construction it builds roads, railroads, bridges, tunnels and ports. Civil Engineering also provides operation and maintenance for national and municipal highways and street networks as well as cares for parks and outdoor property. It also operates water and sewage supply networks. The business area cooperates extensively over regional and country borders for joint development and experience exchanges, project management as well as for creating scale advantages in larger and more complex projects.
THE BUSINESS 2017
The market in most places in both Sweden and Norway was characterized by good opportunities in infrastructure and the local market, concentrated to areas where population growth is intense.
Within certain segments the competition is stiff, partly due to companies from outside the Nordic area. During the year a certain decline was noted in some geographic areas, primarily where housing construction began to slow down.
The Finnish civil engineering market continues to be weak. Projects in the southern part of the country, in the Helsinki and Tammerfors areas, are a sign of some demand. Peab’s civil engineering operations are limited in Finland.
Infrastructure won several new projects in 2017, among them a section of E20 between Alingsås and Vårgårda of 15 kilometers and a bridge over Indal River at Lit. The new section of E22 past Linderöd was completed in December 2017, which was six months earlier than planned. In Norway Peab is building a section of highway on E6 between Trondheim and Melhus. It is expected to open for motorists in the spring of 2019.
The total market volume is relatively constant over time in operation and maintenance and contracts are normally renewed in cycles of 4-6 years. During 2017 Civil Engineering received ten contracts for road operation areas, nine of which were in Sweden and one was in Norway. Four of the contracts were for areas where Civil Engineering was already the entrepreneur. The total order value amounts to around SEK 1,100 million and stretches over 2017-2021 with extension options. The contracts are in Tingsryd, Gothenburg, Gävle, Gällivare, Strömsund, Sollefteå, Sundsvall, Karlstad and Södra Gotland as well as Romerike Øst in Norway. Civil Engineering’s contract with Helsingborg municipality for operation and maintenance of the city center and beaches was also renewed. It comprises the care and repair of parks, streets, sidewalks and bicycle paths, beaches as well as winter and year round preparedness. The contract is spread over 2018-2024 with an option to extend it for another three years.
During 2017 the first stage of construction of a new airport in Sälen commissioned by Scandinavian Mountains Airport AB was initiated. The completion of the project is planned for 2019.
As of 1 January 2017 the Swedish section of the product area Foundation Work is a part of business area Civil Engineering. The measure is expected to generate synergies and more efficient use of resources, in particular in projects with a substantial chunk of foundation work. The civil engineering company Tranab Markbyggnad AB was acquired in 2017, which strengthens Civil Engineering’s presence in the Örebro region. Tranab had net sales of SEK 264 million and 58 employees in 2016.
Continued strong trend for ECI and Partnering projects
Both ECI (early contractor involvement) and Partnering entail working in close collaboration with our customers to develop projects together. In 2017 business area Civil Engineering developed a refined work method and concept better suited to meeting customers’ expectations in these kinds of projects.
Internal measures lead to results
The long-term work Civil Engineering is doing on improving work methods and risk management in large projects has led to positive results. In order to further ensure a common and systematic work method based on continuous improvement Civil Engineering has developed its business management system with the goal of certifying it according to ISO 9001:2015 and ISO 14001:2015 during the first half-year 2018.
NET SALES AND PROFIT
Net sales for 2017 amounted to SEK 11,825 million (10,740) which was an increase of ten percent. After adjustments for acquired units net sales increased by eight percent. The increase during the year stems primarily from product areas Local market and Infrastructure.
Operating profit for 2017 amounted to SEK 374 million (355) and the operating margin was 3.2 percent (3.3).
ORDERS RECEIVED AND ORDER BACKLOG
Orders received during 2017 amounted to SEK 14,191 million (12,089). Two major road projects worth SEK 1 billion each were included last year. Order backlog on 31 December 2017 amounted to SEK 10,832 million (8,679).
Project allocation of order backlog, 31 Dec 2017
|Below 200 MSEK, 73% (66)||201 MSEK – 500 MSEK, 10% (13)||501 MSEK – 1,000 MSEK, 5% (0)||> 1,000 MSEK, 12% (21)|
Operating profit and margin
Net sales, %
|Local market, 55% (57)||56|
|Operations and maintenance, 18% (20)||18|
|Infrastructure and heavy construction, 27% (23)||27|
|Private, 25% (33)||25|
|Public, 62% (54)||62|
|Internal/other, 13% (13)||13|
Net sales, %
|Sweden, 91% (90)||91|
|Norway, 8% (9)||8|
|Finland, 1% (1)||1|